Dubai inflation eases even as fuel costs rise

In September, Dubai's inflation rate showed a slight decrease compared to the previous month, despite rising fuel costs. The annual inflation rate stood at 5.03%, down from 5.54% in August and the June peak of 5.7%. These figures were reported by the Dubai Data and Statistics Establishment on Tuesday. The General Monthly Consumer Price Index in Dubai also dropped by 0.05% month-on-month in September, primarily due to reduced airfares and cheaper holiday packages.

Airfares fell by 23.44%, while holiday packages decreased by 12.47% compared to August. However, on an annual basis, the transport sector contributed the most to the rise in consumer prices, increasing by 14.7%. This surge was caused by a 37.52% rise in fuel and lubricant costs for personal transport and a 13.48% rise in air passenger transport, as per the latest government data.

The transport segment, making up 9% of Dubai's Consumer Price Index basket, has been the main driver of inflation in the emirate over recent months due to rising petrol prices. UAE fuel subsidies were lifted in 2015, and prices are evaluated monthly based on global market fluctuations. In October, petrol prices in the UAE rose for the third consecutive month as global oil market prices remain high, following the eighth month of the war.

Brent crude, which reached around $110 per barrel in September, has remained above $100 in recent weeks. The Strait of Hormuz has been a flashpoint due to increasing attacks on Saudi infrastructure by Houthi rebels in Yemen, adding another layer of risk to energy supplies from the region. Despite economic challenges, Dubai's economy has largely avoided the deeper slump seen in some neighboring countries.

Non-oil private sector business activity in the emirate, a major business and tourism hub in the Middle East, continued its strong growth trajectory. The Purchasing Managers' Index stood at 54.5 in September, an increase from 54.1 in August, indicating a "solid improvement" in Dubai. The rapid growth in non-oil economic activity was driven by a substantial surge in output, rising new orders, and increased employment, according to S&P Global Markets Intelligence.

The tourism and retail sectors have also rebounded from the initial impact of the war. Property, one of the top contributors to Dubai's economy, has held up relatively well, with the food and drinks category increasing by 8.05% annually, and housing, water, electricity, gas, and domestic fuel rising by nearly 6.23% due to the growth in average residential rental prices across most areas of the emirate.